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article imageCalifornia's Gallo Wines grabs an opportunity to expand

By Robert G Cope     Jul 10, 2012 in Business
Seattle - E&J Gallo, the largest family-owned wine producer in the world, as reported in Washington State's 'Yakima Herald,' July 9, reports Gallo has purchased, not one, but two wineries in the second largest wine producing state. California being first.
Covey Run and Columbia wineries, according to a related report in Wine Spectator's Shanken Daily News, now under Gallo's Premium Wine Division, will (over five years) increase output from 250,000 cases a year to over 1 million.
Komo News in Seattle, even Reuters, internationally, join Roger Nabedian, General Manager of the Premium Wine Division, in heralding the prospects for Washington wines, Nabedian saying, “Gallo ... will build the Washington wine category nationally.”
Nabedian declined to reveal the purchase price, but Reuters reported the brands fetched between $50 and $100 million.
While Gallo is best known for value-priced, jug wines, in recent years its business strategy is enhancing its premium brands worldwide.
Mike Veseth, an economics professor at the University of Puget Sound, author of “Wine Wars,” no doubt, would see this move as consistent with (I call here) 'The 10-cent Principle.' In his book, the good professor tells how Ernest Gallo offered a New York customer (in the 1930's) sample glasses of two red wines, one from a bottle costing 5 cents, the other 10 cents. The customer, after tasting both, pronounced, “I'll take the ten-cent one.” The wines, of course, exactly the same.
Some years ago, as a guest in a yacht in Seattle, with a wine-toting visitor from the east coast, Bill and Betty (the yacht owners), with Betty pouring, suggested a blind-wine taste test. We three men, doing the sniffing and swirling, announced our preferences among three possibilities, only to learn Betty poured the same wine in all three glasses.
While there may be little or no correlation between prices and wine evaluations, the 'The 10-cent Principle' will work to a brand's advantage. Clearly Gallo knows.
The expansive grape growing region of Washington is at the same latitude as France
The expansive grape growing region of Washington is at the same latitude as France
Going again beyond the news as reported, this observer also sees the Gallo move as an entrance into an expansive wine region (about 1/5 of Washington State) needed to overcome the crowded landscape of California.
There is also the possibility the United Sates, now 4th in the world in wine production, will move closer to the three leaders: France, Italy, and Spain.
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